"Whether you're operating as a sole trader or run a growing limited company, the choice between leasing and personal contract purchase (PCP) can affect factors such as cash flow, tax requirements and day-to-day operations. Choosing the wrong financial structure can leave you with unexpected bills at the end of a contract. This is why it is important to have a strategy that can keep your team mobile without compromising your balance sheet."
"Leasing is also known as a business contract hire. It is where you pay for the use of the vehicle rather than its full value. It means fixed monthly payments, which makes budgeting more straightforward, and is suitable if you like to refresh your fleet every few years. PCP can offer the possibility of ownership at the end of the agreement via a balloon payment."
"Leasing generally offers lower monthly payments, as you are only funding the usage of the vehicle, rather than its full value. With this type of structure, it supports a steadier cash flow and frees up working capital for stock, staffing or marketing. PCP usually requires a deposit and higher monthly payments. The deferred final payment however can offer some breathing room if cash is tight later."
Vehicle funding choices between leasing and PCP affect cash flow, tax obligations and daily operations. Leasing funds vehicle use rather than full value, offering fixed monthly payments and easier budgeting, making it suitable for regular fleet refreshes and preserving working capital. PCP involves a deposit, higher monthly payments and a deferred balloon payment that can enable ownership at contract end, suiting businesses that plan to keep vehicles longer. The right choice depends on how central vehicles are to operations, desired financial certainty, exposure to future vehicle values, and the need to avoid unexpected end-of-contract costs.
Read at London Business News | Londonlovesbusiness.com
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